Company capital gains relief is frozen

Before the Autumn Budget, the capital gains tax (CGT) calculations of companies included a relief called the indexation allowance. Basically, this allowed a company to increase the acquisition cost of an asset by the annual rate of inflation.

Without this relief, any CGT payable on the sale of the asset would increase. Instead of deducting the cost plus the inflation proofed indexation allowance, companies would only be able to claim the historical cost.

This allowance has effectively been axed in the budget last week.

Assets owned prior to 1 January 2018

Companies that currently own assets that will be subject to a CGT payment when they are sold, will have any indexation relief capped at the RPI for December 2017. Accordingly, they will still get a measure of relief up to this date.

Assets acquired on or after 1 January 2018

Assets acquired on or after 1 January 2018 will no longer be able to claim indexation relief.

Companies should therefore be aware that if inflation continues to rise they will be paying tax on the inflationary value of the chargeable asset sold.

According to HMRC:

The measure aligns the treatment of capital gains by companies with that for individuals and non-incorporated businesses for whom indexation allowance was abolished in 2008. It will also align the treatment of capital disposals with disposals of similar assets as part of a company’s trading activities.

In addition, it will simplify tax computations and remove a source of potential errors.

What this measure will do, is to increase the corporation tax of companies that dispose of assets subject to CGT.

This entry was posted
on Monday, December 4th, 2017 at 12:00 am and is filed under Uncategorised.
You can follow any responses to this entry through the RSS 2.0 feed.
Both comments and pings are currently closed.

GET IN TOUCH

STAY CONNECTED WITH US

Hallys & Co Chartered Accountants is the trading name for Hallys & Co Limited, a company registered in England & Wales. We are a member firm of the Institute of Chartered Accountants in England and Wales (ICAEW).
We are registered to carry on audit work in the UK and Ireland. - Company no. 09342848. Registered office address: Devonshire House, 582 Honeypot Lane, Stanmore, Middlesex. HA7 1JS. Copyright 2018Sitemap | Privacy Statement and Cookie Policy